Re Lamo Holding BV

The court granted the Company's application to convene meetings and to sanction a scheme of arrangement under Part 26 of the Companies Act 2006 and section 899. The court applied the established test for sanctioning a scheme (compliance with statutory procedure, fair representation of the class, bona fides of the majority and whether an intelligent and honest member might reasonably approve) and considered the appropriate comparator for assessing fairness.

The judge concluded that the relevant comparator was an insolvent liquidation (under the Dutch Bankruptcy Act or equivalent processes) rather than a solvent, orderly wind-down, because the evidence established a realistic prospect of enforcement by secured lenders if the Restructuring Measures failed. Key documentary and witness evidence (including from the Company's CFO, the MoCom representative and advisors) was accepted and the Shareholders’ alternative solvent wind-down scenario was held to be speculative and unsupported by direct creditor evidence. The court also found that statutory majorities had validly approved the Scheme and there was no blot or unfairness requiring refusal to sanction.

The judgment addressed the Scheme's links to concurrent WHOA proceedings in the Netherlands, the Implementation Agreement (including the Shareholder Allocation Clause for Depositary Receipts) and the need for recognition in key foreign jurisdictions; it recorded that the Deed of Release was amended on undertaking and that a Foreign Representative was appointed. The Dutch court ultimately confirmed the WHOA Plan.

This was a first instance sanction hearing of a scheme of arrangement proposed by Lamo Holding B.V. (the Company) as part of wider cross-border restructuring of the Vroon Group involving a WHOA plan in the Netherlands and a stay of enforcement there.

Nature of the application: The Company sought (i) an order convening and conducting creditor meetings and (ii) an order under section 899 of the Companies Act 2006 sanctioning the Scheme that formed part of the wider Restructuring Measures.

Background and parties: The Group operates a fleet of vessels and was heavily indebted under many separate facility agreements and a Framework Agreement. The Parent was pursuing a WHOA restructuring in the Netherlands. The Scheme (to bind specified Scheme Creditors) formed part of the package of Restructuring Measures. The Shareholders of the Parent opposed sanction, arguing a solvent wind-down would produce a better return for shareholders and some creditors.

Issues framed by the court:

• whether the statutory requirements and class composition were satisfied;
• whether non-party Shareholders had a sufficient interest and, if so, whether they should be permitted to adduce live evidence and cross-examine witnesses at the sanction hearing;
• what was the proper comparator for assessing fairness (insolvent liquidation v orderly solvent wind-down);
• whether the Scheme (and linked Implementation Agreement) was fair to creditors and the Shareholders and whether any blot or defect existed; and
• whether the Scheme was likely to be effective in key foreign jurisdictions and whether foreign recognition issues required refusal to sanction.

Reasoning and decision: The court accepted the established Telewest/Plowman formulation of the sanction test and emphasised judicial restraint while recognising the court must assess fairness. The judge allowed the Shareholders to be heard and heard live evidence. On the facts, the court accepted the Company's and creditor representatives' evidence (notably the CFO and MoCom witness) that if the Restructuring Measures failed there was a realistic prospect of multiple enforcement actions by lenders leading to insolvency or fragmentation of value. The Shareholders' evidence that a solvent orderly wind-down was the likely comparator was held to be speculative and unsupported by direct creditor evidence; their expert and counsel had not tested the lenders' intentions and some of their Dutch submissions were inconsistent with their English position. The judge concluded the comparator was likely insolvent liquidation, statutory majorities had validly assented, the classes were properly constituted, the Scheme was one that a reasonable creditor might approve, and there was no blot or defect. The judge therefore sanctioned the Scheme, appointed a Foreign Representative and recorded procedural undertakings and amendments (including to the Deed of Release). The Dutch court subsequently confirmed the WHOA Plan.

The Court sanctioned the Scheme and made the Sanction Order. The judge concluded that the statutory requirements were met, the Scheme Creditors were fairly represented and acted bona fide, and the Scheme was one that an intelligent and honest member of the creditor classes might reasonably approve. The relevant comparator was held to be insolvent liquidation rather than a solvent orderly wind-down, the Shareholders' contrary case was rejected on the evidence, and no blot or defect was found that required refusal to sanction.